Monheim, Germany
September 3, 2003

New company gets off to a successful start
Above-average growth with new products

Bayer CropScience is set to continue its growth strategy. The company is planning to launch 14 new active ingredients in the period from 2001 to 2005. Additional sales from new products could exceed EUR 800 million by 2006.

Dr. Jochen Wulff, Chairman of the Board of Management of Bayer Crop Science AG, commented at an international press conference attended by 120 journalists in Monheim: "With our customers, we intend to grow faster than the market to become the world's leading crop science company. This is fittingly expressed in our slogan 'Your Partner for Growth'."

The purchase of Aventis CropScience in early June 2002 was the biggest acquisition in the 140 years of Bayer history. According to Wulff, the subsequent creation of Bayer CropScience AG is the starting capital for a new industry leader: "Against strong competition we have made a decisive step towards achieving our strategic objectives." The company is striving to attain an EBITDA (Earnings before interests, taxis, depreciation and amortization) margin of 29 percent by 2006. Assuming long-term growth in the global crop protection market of around 2 percent annually, the company is planning to increase revenue by 4 percent per year.

With approximately 20,000 employees worldwide at present and products and services in more than 120 countries, Bayer CropScience is among the top players in the industry.

It is already the market leader in Crop Protection and Environmental Science, and is aiming to strengthen this leadership and expand its activities in seeds and plant biotechnology. Environmental Science is focused on pest control and plant protection in non-agricultural sectors such as public health and gardening.

Promising start and good performance
Wulff described the first six months of 2003 as a clear indication of just how well the new company is performing: "Since the acquisition we have been able to hold our own extremely well in a difficult market environment.

All three businesses – Crop Protection, Environmental Science and BioScience – are developing well." In the first six months of 2003, Bayer CropScience increased sales by 66 percent to EUR 3.228 billion as a result of the acquisition.

The company has already initiated a number of measures as part of the integration process which are designed to enhance profitability, the head of Bayer CropScience commented. The aim is to achieve synergies with a value of EUR 570 million annually from 2006.

New product developments in recent years and new market introductions in the coming years will be key factors enabling the company to achieve its mid-term objectives. With a research and development budget currently in excess of EUR 700 million annually, Bayer CropScience is investing in innovative products for agriculture and has a leading role in the industry.

Successful integration and a new corporate structure
Wulff explained that the global business activities have been integrated successfully, and the merger of the two companies at country level is now complete. "We set out to merge two global ventures, thereby creating a new market leader. I am proud to say that, within a very short period of time, we have built an excellent base from which to achieve our ambitious goals." Bayer CropScience is structured in line with customer and business requirements. A global network of regional and country organizations makes sure that the company is close to the customer and can make business decisions fast.

Bayer CropScience has also succeeded in completing the divestments imposed by the European Commission and US Federal Trade Commission within the stringent time schedule demanded by these authorities. The company has completed 33 individual projects with a total value of EUR 1.7 billion. With a divested sales volume of some EUR 700 million, this represents a multiple of 2.4 times the annual sales of these products.

The company has coped well with the enormous amount of work involved in the integration process. "We have successfully managed the difficult reorganization phase and have defended our market share," Jochen Wulff stated. "I have no doubt that our new team represents the cream of the crop of both companies and possesses the talent, focus, insight and experience to achieve the goals that Bayer CropScience has set itself in the years to come."

Wulff sees the conditions in the highly competitive crop science market as a challenge. "I'm confident that we are going to be among the winners," he said. Bayer CropScience has a broad and balanced product portfolio, a competitive cost structure and the critical mass needed to offer products at competitive prices. The company's strong presence in profitable specialty markets is another positive factor. "Our cutting-edge technology puts us ahead of the field in innovation and research for chemical crop protection, and we have a good basis for the emerging segment of plant biotechnology."

Agricultural productivity and the global challenge
The Chairman of Bayer CropScience's Board of Management made it very clear that the demands of a growing world population for food, feed and fiber require world agriculture to produce higher yields from the same amount of cultivated land. "We at Bayer CropScience are firmly committed to promoting sustainable agriculture that ensures an appropriate balance between economic viability, environmental responsibility and social acceptability," Wulff said. The company's technology solutions help farmers improve productivity to meet increasing demands.

Political framework offers an opportunity
Wulff expects the European Union's reform of its Common Agricultural Policy to make European agriculture more competitive in the longer term. The eastern European countries joining the EU represent a growth market for the crop protection business in the medium term due to improved agricultural productivity. Wulff said: "We at Bayer CropScience will utilize our market position in the eastern European countries to participate strongly in this growth."

Safety for the environment and for consumers
Wulff took a critical view of the increasing complexity of product registration. The crop science industry is currently one of the most regulated industries in the world. The high level of investment in research and development needs to be considered in striking the right balance between the company's profitability targets and its social and environmental responsibilities. "Registration procedures based on science and a predictable planning environment for new products are vital if the needs of the market and consumers are to be met," he said.

Market position maintained in a difficult environment
Dr. Esmail Zirakparvar, Member of the Board of Management of Bayer CropScience and responsible for Business Operations, said that Bayer CropScience has an extensive product portfolio and currently ranks at the number 2 position in the industry. Adverse weather conditions in North America and other important markets such as India and Australia created a very difficult market environment in 2002. "We can see signs of recovery in the markets in North America and Latin America in 2003," he explained, although unusual weather conditions in Europe and the strength of the Euro are having a negative impact.

The market for chemical crop protection products as a whole is expected to show moderate growth in the coming years, and Bayer CropScience anticipates continued substantial growth in its Environmental Science business.

According to Zirakparvar, expansion of special applications in the professional pest management area and the trend to more intensive hobby gardening activities in developed countries will drive growth in this segment.

Bayer CropScience sees the greatest opportunities for growth in the plant biotechnology segment. The BioScience business will benefit in the medium term from new agricultural practices and new processes being developed in plant biotechnology.

Highest research and development budget in the industry
Bayer CropScience will be investing around EUR 650 million in research and development in the long term, according to Dr. Bernward Garthoff, a member of the Board of Management and responsible for Technology. "This makes our R&D budget one of the highest in the industry," he explained. For the year 2004, the company is planning to spend over EUR 200 million on upgrading existing facilities and constructing new ones. A new, EUR 18 million BioScience research center is currently under construction in the Belgian town of Gent, and is due to be opened in 2004.

According to Garthoff, Bayer CropScience has now completed the restructuring of its research activities. "We expect our business to gain further momentum from a strong flow of product registrations and effective use of research synergies," he said.

Focusing on innovation
The long-term success of the company in an increasingly complex competitive environment will depend on its ability to offer new and effective solutions to the farming industry. Garthoff said: " We want to create true added value for our global customers." Newly evolving pest problems have to be solved and older products need to be replaced by more up-to-date compounds. Increasingly stringent regulatory requirements and customers' growing expectations also demand an efficient and innovative organization. Bayer CropScience is also cooperating on an international basis with external technology partners to identify new classes of substances.

Strong growth in the BioScience business
Garthoff sees substantial growth potential for the BioScience business: "With pro forma sales of EUR 240 million in 2002 and EUR 168 million in the first six months of 2003, we are one of the fastest-growing companies in the plant biotechnology market." Although consumer acceptance of green biotechnology is still low in Europe at present, the company expects demand for high-quality food, feed and fibers for the textile industry to increase. Garthoff referred to the new technology as the "key to production of affordable, renewable and sustainable biomaterials".

Garthoff continued: "Our wide range of biotech development activities goes well beyond current applications such as plants with herbicide tolerance." One example of quality enhancement is potatoes with improved starch properties. In the international cotton market, too, the company is fast becoming one of the leading seed suppliers. "Since our FiberMax business was launched we have achieved a market share of 11 percent in the USA, the biggest market for cotton, and we will continue to expand this position," Garthoff explained.

New classes of chemistry from Bayer research
In the coming years, the company expects to gain additional growth from its rich and well-balanced development pipeline. State-of-the-art technologies will enable Bayer CropScience to expand further its strong position in research and development. This will allow Bayer CropScience to offer customers new solutions and new applications. Garthoff said: "It is our goal to introduce two to three new compounds to the market every year." He particularly highlighted the new ketoenole class of insecticides; Bayer CropScience expects them to perform well and is currently developing a third compound of this class.

Read also, on this website:

- Address by Dr. Jochen Wulff, Chairman of the Board of Management, Bayer CropScience AG

and on the Bayer website:

- Address by Dr. Esmail Zirakparvar, Member of the Board of Management, Bayer CropScience AG

- Address by Dr. Bernward Garthoff, Member of the Board of Management, Bayer CropScience AG

- Monheim – Bayer CropScience's headquarters

- A Network of Global Competence

- The Hit Factory – New technologies in crop protection